On May 1, Year 1, Benz’s Sandwich Shop loaned $14,000 to Mark Henry for one year at 8 percent interest. Required a. What is Benz’s interest income for Year 1? b. What is Benz’s total amount of receivables at December 31, Year 1? c. How will the loan and interest be reported on Benz’s Year 1 statement of cash flows? d. What is Benz’s interest income for Year 2? e. What is the total amount of cash that Benz’s will collect in Year 2 from Mark Henry? f. How will the loan and interest be reported on Benz’s Year 2 statement of cash flows? g. What is the total amount of interest that Benz’s earned on the loan to Mark Henry?
On May 1, Year 1, Benz’s Sandwich Shop loaned $14,000 to Mark Henry for one year at 8 percent interest.
Required
a. What is Benz’s interest income for Year 1?
b. What is Benz’s total amount of receivables at December 31, Year 1?
c. How will the loan and interest be reported on Benz’s Year 1 statement of
d. What is Benz’s interest income for Year 2?
e. What is the total amount of cash that Benz’s will collect in Year 2 from Mark Henry?
f. How will the loan and interest be reported on Benz’s Year 2 statement of cash flows?
g. What is the total amount of interest that Benz’s earned on the loan to Mark Henry?
Working note 1 : Interest should be calculated for 8 months ( May 1 to Dec 31)
Interest Income = 14,000 * 8% * (8/12) = $747
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